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Singapore vs Malaysia: Which is More Business-Friendly Location?

Singapore and Malaysia – two key economies in Southeast Asia – share similarities in terms of culture, heritage, and geography. However, for an entrepreneur new to the region, it is worth highlighting that the two countries are different in terms of how they do business.

Business setup

The World Bank has consistently classified Singapore as one of the top places to do business in the world. In the latest “Doing Business” report, Singapore was ranked second, ahead of Malaysia which earned the 24th spot. Countries were ranked based on how easy it was to do business with indicators such as starting a business, dealing with construction permits, attaining electricity, registering property, accessing credit, enforcing contracts, and resolving insolvency. In fact, it takes just one day to complete company formation in Singapore and incorporation procedures, while the same procedures take two to three days in Malaysia. In both countries, the types of entities available for business incorporation are private limited company, limited liability partnership, branch office, representative office, subsidiary, and sole proprietorship.

Tax regime

Both Singapore and Malaysia have a progressive tax system. In terms of corporate tax, Singapore places a 17% corporate tax rate, compared to Malaysia’s standard corporate tax rate of 24%. Companies can refer to Double Taxation Agreements (DTAs) in both countries to optimise their tax positions. Read more about DTAs here. With the aim of fostering a pro-business environment, Singapore also has several tax incentives for companies. Click here to read about the 10 tax incentives available to Singapore companies now. In terms of personal income tax, a Singaporean tax resident can pay from 0% to 20% of taxes, and a non-tax resident pays 15% of taxes or the resident tax rate, depending on which is higher. In Malaysia, a tax resident pays 0-26% in taxes, while a non-tax resident pays a flat rate of 28%.

Workforce

Singapore is well-known to produce high calibre graduates for the workplace. The Singapore workforce is effectively bilingual, with English implemented as the official language. As a testament to Singapore’s talented workforce, the country was ranked 13th in the “World Talent Rankings 2017” published by IMD business school. The rankings were based on the following criteria: investment and development, appeal, and readiness. In the Malaysian workforce, people typically converse in Malay, but also have a basic command in English. With a population of over 30 million, Malaysia offers a larger workforce pool than Singapore. In the IMD rankings, Malaysia placed 28th.

Market opportunities

Earlier this year, the Singaporean government shared the seven strategies to spring Singapore forward. The Committee on the Future Economy, which is tasked to develop economic strategies for Singapore’s next ten years, identified the sectors of finance, hub services, logistics, urban solutions, healthcare, digital economy, and advanced manufacturing as the areas that the country should focus on. This represents market opportunities for companies seeking to tap into Singapore’s market. As for Malaysia, there will be market opportunities in the areas of healthcare, education, food, and retail. Leveraging on its country size, Malaysia has outlined five economic corridors for development. These are namely the Iskandar Malaysia, the East Coast Economic Region, the Northern Corridor Economic Region, the Sabah Development Corridor, and the Sarawak Corridor of Renewable Energy. More recently, Malaysia has partnered with Alibaba – a Chinese e-commerce, retail and technology conglomerate – to launch a Digital Free Trade Zone: a regional logistics hub for small and medium-sized companies.

Infrastructure

The infrastructure in Singapore has consistently been recognised as being world-class. For example, Singapore was recognised as having the best city infrastructure in the Mercer 2017 Quality of Living Survey. The City-State is also known to have the best seaport in Asia according to the 2017 Asia Freight, Logistics and Supply Chain Awards. Singapore’s port won the top spot for its port’s cost competitiveness, container shipping-friendly fee regime, and delivery of suitable container shipping-related infrastructure. Singapore is equally known to have the best airport as evidenced by the 2017 World Airport Awards. Singapore’s Changi Airport has won this accolade for five years in a row. Malaysia is well-connected by sea, having a total of seven international ports. Two of the ports, namely Port Klang and Port of Tanjung Pelepas, are among the top 20 container ports in the world. Malaysia is also well-connected by air with seven international airports.

Conclusion

Companies which are looking for a big market size or an Islamic focus will likely choose Malaysia as the place to do business. However, generally-speaking, entrepreneurs will find Singapore as the more business-friendly location to set up their companies due to the ease of business setup, tax regime, market opportunities and workforce. Contact AM Corporate Services today on how we can help your business to grow.